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FX Market Report believe today’s Eurogroup decision for a €130bn Greek bailout won’t be a full agreement, but a partial deal with “difficult and contentious issues unresolved until a later date”.

“Here at FXMR we remain convinced that Greece is irreparably broke and has no sustainable debt dynamic other that a default and a new beginning”, writes Gavin Grier-Rees, stating that Germany, Netherlands and Finland already voice the same opinion. “That’s why we predict ever harsher conditions will be imposed on the Greeks until they eventually are forced from the single currency. What we are seeing here is both sides trying to avoid being given the blame for ending the dream of a single currency”, he adds.

FXMR analysts believe the strong week start, high at 1.3240, was a relief move as Greece didn’t default this weekend.

“Risk‐reward must be to the downside”, with supports at 1.3110-15 and 1.3145-50. As news disappoints, last week’s lows at 1.2975 is next target.

Discussion about a Greek default is rising: “Given that the market has had plenty of time to prepare (or be prepared) then the question is whether it would be that much of a shock”, writes Gavin Grier-Rees, analyst at FXMR, pointing to a natural Euro sell-off in reaction, but that could be rapidly retraced by short covering, as “the market is too short”.

Adding to that is far eastern investors thinking “that a euro without Greece is likely more stable and hence stronger”, but in another hand, a Greek departure opens a precedent, which might increase volatility/uncertainty about the other peripherals future: “The problem is that Europe’s structural problems are not confined to Greece. They might well be the extreme example but the other peripherals each have similarities that place them at risk too”, adds Grier-Rees.

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